retail price index

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Retail Price Index

A measure of inflation that considers what people spend on staple goods and services. It is calculated by taking the average of changes in price to a basket of goods and services compiled by the appropriate government agency. The goods and services in the basket are weighted according to their perceived importance. The RPI was considered a primary tool in determining how people are experiencing inflation, but it has largely been superseded by the Consumer Price Index. It is primarily used today in the British news media.
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Retail price indexclick for a larger image
Fig. 169 Retail price index. Composition of the RPI. Source: Office for National Statistics.

retail price index (RPI)

a weighted average of the PRICES of a general ‘basket’ of goods and services bought by final consumers. Each item in the index is weighted according to its relative importance in total consumers’ expenditure (see Fig 169 ). Starting from a selected BASE YEAR (index value = 100), price changes are then reflected in changes in the index value over time. Thus, taking the example of the UK's ‘all items’ Retail Price Index (RPI), the current RPI base year is 1987 = 100, in February 2005 the index value stood at 189, indicating that retail prices, on average, had risen 89% between the two dates.

A retail price index is commonly used to measure the rate of INFLATION and as a GNP DEFLATOR. In the UK, the ‘all items’ RPI was formerly used to measure the ‘headline’ inflation rate, while the RPIX index, which excludes mortgage interest payments, measured the ‘underlying’ inflation rate. In December 2003, the RPI was replaced by the CONSUMER PRICE INDEX (CPI) as the government's ‘official’ meaure of inflation, thus bringing it into line with European Union practice. See HARMONIZED CONSUMER PRICE INFLATION RATE. See Fig 93 (a) , main INFLATION entry, for statistics on inflation rates in recent years.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
HSBC economist Mr Jonathan Loynes said the news should put a February rate cut by the Bank of England's Monetary Policy Committee back on track "if only because it bodes well for an immediate reversal of the increase in the retail price index we saw in D ecember".
The figure is down on the 3.7 per cent year-on-year rise in March and lower than the Retail Price Index (RPI) measure of inflation.
The cost of services provided by tradesmen has risen by 204% since 1984, almost double the rise in the retail price index (109
Although fares on some routes can go up by the retail price index plus 2%, the overall effect has to be neutral.
Ms Pam Webber, economist at the BRC, said the survey gave a more accurate picture of inflation as seen by ordinary shoppers than the official retail price index released by the Office for National Statistics.
This can have a knock-on effect for people where their incomes are linked to inflation (typically the Retail Price Index).
Train companies wanted to scrap the fares' formula based on the retail price index. But Transport Minister Lord Adonis said: "Reports suggesting we might just freeze fares are not correct."
The Retail Price Index, which includes retail price inflation and some housing costs, also fell from 2.7 per cent to 2.5 per cent over the same period, its lowest level since April 2004.
The headline rate of Retail Price Index inflation, which includes mortgage interest payments, was unchanged at 2.9 per cent in June, while the underlying RPI rate rose to 2.2 per cent from 2.1 per cent.
The rate of inflation, measured by the retail price index, dipped after banks and building societies followed the 0.25pc cut in interest rates to 3.5pc by reducing their own interest charges,according to the Office of National Statistics (ONS).
But British Retail Consortium director general Bill Moyes said: ``Even with the rise in the shop price index the figures show that strong sales growth is not creating worrying inflationary spikes in the retail price index. Consumers can still buy more for their money than they could in 1997.''
The index is different from the official UK inflation figures known as the retail price index because they do not include the costs of many public and private services such as council tax and costs to the health service.